Saturday, November 27, 2010

It's somehow fitting that the €600 million giant glass and steel new airport terminal in Dublin opened on the very day the army of technocrats sent by the IMF and EU arrived to take over Ireland. A white elephant to symbolize how quickly a Celtic Tiger can be transformed into one of the PIIGS. Floating in and out of the international news stream I keep seeing the financial world in terms of a dystopian fairy tale where the bad guys always come out winners while the public is left to pick up the tab and we never seem to learn the moral. The Big Bad Wolf outwitted the littlest of the pigs earlier this year which forced the rest to scurry to a house made of wood while the Greek straw hut went up in flames. This week saw Ireland give up its wooden shack offered by the nationalization of her banks' debt as the growing storm forced her to surrender independence to Mother Europa and her IMF advisers. In Europe it's two PIIGS down and three to go, Portugal, Spain and Italy, meanwhile much of the western world is also looking for a brick house to give us shelter from the storm.

Ireland's path to financial purgatory has been predictable. Greece's problems came from many sources, rapacious banks taking advantage of financial rubes, politicians on the take and of course the MSM's favourite scapegoat, the lazy, sponging, early-retiring, Greek workers. Ireland's problems stem from one source - greed. Both the banks and the public were caught up in a collective euphoria brought on by the belief that shiny new buildings and playthings meant perpetual growth and wealth for all. A pot o' gold at the end of every rainbow. Ireland became an economic success story between 1994 and 2007 as GDP growth regularly touched 10% a year with the boom ascribed to reasons as varied as the success of U2 to the legalization of contraceptive sales in 1979. More prosaically, economists generally credited the rise of the Celtic Tiger to a combination of EU development funds and low corporate taxes with a global shift to a knowledge-based economy for which the Irish education system was ready to provide the skilled workforce all at a time of strong global expansion. The sudden success soon turned to hubris; while the main proponents of unconstrained financial globalization may have been American, it was Irish (as well as other European) banks that really became too large relative to their economies, taking risks that paid off big in boom times but exploded in their faces when the rainbow faded. As long as new Starbucks were being opened on Dublin's Grafton Street, it didn't seem to worry anyone that it had become the fifth most expensive street in the world.

When the inevitable financial crash came a couple years ago, it was the Irish who unsurprisingly woke up with the biggest hangover as they had partied harder than everyone else. Seems even property prices have to follow the laws of gravity and unfortunately the country had staked its future on Newton being wrong. In a decade, housing prices quadrupled making for a painful drop. Compounding matters, like many governments around the world, the decision was made to save the banks at the expense of the country, by guaranteeing the Irish banks' debt for two years. An excuse could be made acting as they did in the midst of a crisis, but extending the guarantee to the end of the year in September was inexcusable. The government gambled that the credit market somehow hadn't noticed that the six debt-guaranteed banks (Anglo Irish Bank, Allied Irish Banks, Bank of Ireland, Irish Life and Permanent, Irish Nationwide and EBS) had been hemorrhaging billions of euros a month and lost the bet. If it were only the Irish with anything to lose, the EU and the world may have stood by and watched the stuck pig bleed herself to death, however, not only do foreign banks have a huge stake in Irish debt, the remaining PIIGS financing costs are also tethered to Ireland's woes.

And so it was that Irish sovereignty was traded for another shot at providing bankster security. Even though the government was fully funded until the middle of next year, bondholders of Irish banks realized their security window could close anytime after the new year and therefore began a vicious attack on Irish bonds, bidding up the spreads versus German rates, stoking fears in the credit market. The tragicomedy was scripted from the moment the EU bailout fund was created after the Greeks ceded their sovereignty earlier this year. Ireland following suit was a self-fulfilling prophecy - when was the last time that available credit wasn't used? Those squeals of protest that a bailout wasn't needed we heard from the Irish Prime Minister, or Taoiseach, Brian Cowen, were drowned out in the media by those who insisted it was needed in order to maintain confidence in the debt market. Somehow it passed as normal that a country can be forced to take a bailout to pay the debts of profligate banks. Ireland had to be convinced they needed help but families trying to feed their kids wouldn't need much arm twisting. Instead, welfare will be slashed, public health services will deteriorate, children, the disabled and the elderly will lose the already inadequate services that afford them some hope and dignity. But the €100 billion that is owed by the Irish to German banks and the €109 billion owed to British banks will be secured.

Instead of the banks borrowing money from the European Central Bank at one per cent interest to fund their operations, the Irish public will borrow it for them at perhaps five per cent. The banks and their corporatist enablers have done a masterful job, not of banking, but of keeping the public confused and therefore impotent to do anything. The possibility of senior bondholders actually sharing in some of the cost of the bailouts by taking a haircut isn't even mentioned, funny, seeing as default risk is priced into the cost of debt for the borrower. No, the lenders are allowed to keep any profits they got from taking too much risk but are exempt from taking any losses when they actually occur. Such a situation creates moral hazard where financial institutions seeking to increase profit simply turn up the risk knowing full well that if their bets go sour, governments will step in and save them. Private gains and socialized losses, but, only for the banks. Now that's capitalism!

More than two years into the financial crisis and were still uncovering the filth and rot at the core of the world's financial system. The Irish case may be magnified in scale relative to its population but those that caused their banking collapse have doppelgangers all over the world and none of them will ever feel an ounce of guilt for what they've done. The names and acronyms of destruction may change but it's those in the know, on the take or at the table who are able to feed at the trough of asset bubbles created and fed by the banks who the public will be paying to support for years, as much as €200 billion in Ireland alone with a population of 4.5 million (and shrinking again) - €44,444.44 a head! This mass delusion was enabled by a culture of greed and avarice which glorifies the rich regardless of their social cost. Most of those who gorged themselves walk the streets free, able to enjoy the fruits of their deception. Bernie Madoff was no worse than Seán Quinn who built a pyramid scheme of CFDs which allowed him to control 25% of Anglo-Irish Bank only to see it inevitably collapse when the stock price went south. ASIC, the Australian SEC, describes CFDs, or contracts for difference, as "much riskier than a flutter on the horses or a night at the casino" much like psychopaths who recognize no limits and ignore the damage they do to others; CFDs continue to be traded and psychopaths continue to walk the streets and run our most powerful and influential institutions.

Seán FitzPatrick, former chairman of Anglo-Irish, a man who hid hundreds of millions in loans to himself, oversaw the bank which established a precedent of reckless lending the other banks were forced to follow in order to keep pace so as not to lose market share and thus see their stock price plummet. Ah, the irony. No longer seeing themselves as bankers but risk seeking entrepreneurs, in their eagerness to woo property syndicates the banks became both the lenders of equity and providers of debt in the same deals, resulting in absurd loan to value exposure of up to 100%. Even once it was clear the game was up and the government had stepped in to save them, the banks continued to deceive everyone around them hoping to continue the party a little longer. A stream of false information has been fed to the very entity created to take the non-performing loans off the banks' hands, NAMA, meaning the extent of damage the banks have done may take years to figure out. The incestuous relationship between banksters and government is most blatant in the US but Ireland has its own government protected "Golden Circle" who will escape punishment as the details of their deception are impenetrable to the normal person and so will become fodder for legend and lore, circular transactions being better than fairy tales at putting the public to sleep.

So, once again, who cares? When Greece was taken over six month ago at least it made the cover of the newspapers. This time, unless you were paying attention, you might not have even noticed that Ireland is now being run by EU and IMF bureaucrats. Trouble is we should care, but can't seem to bother. Even if someone does dare to bother, here's what we supposedly know: Ireland is not Greece and Greece is not Ireland, Spain is not Greece and of course Portugal is not Greece, and obviously Spain is neither Ireland nor Portugal so it follows that Neither Spain nor Portugal is Ireland. Thanks, but that's exactly how much the financial ministers and their puppet master banksters want us to know, because we are all destined to become Greece and Ireland soon enough. After all the public has already forgotten how the Spanish opposition leader was calling on his country to follow Ireland a short three years ago or that today's Polish prime minister wanted his country to emulate the Irish model at the same time. Next on the list is Portugal. Again, meh, whatever, it's just Portugal. That's when things get interesting however, as next on the list will be Spain and that's when we learn that in addition to TBTF, Too Big To Fail, there is such a thing as TBTB, Too Big To Bail.

Unsurprisingly, the wolves are already circling, bond holders smelling fresh kill wasted no time in turning their attention to the next victim. Spain's sovereign bond spreads over German Bunds hit euro-era highs the day after markets were supposedly pacified by the Irish takeover. What a shock! Set to steepen Ireland's economic nosedive is the new round of austerity measures, a condition of the EU/IMF rescue package. Huh? But surely cutting €15 billion out of the economy should help, right? Nope. Just look at the negative market reaction, they noticed what the first round of austerity two years ago did to the country, when the Irish tightened their belt while the rest of the world opted for stimulus spending. Having already raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent last time, round two will see even deeper cuts, making one wonder just where economic growth needed to balance the books will ever come from. Just a taste of some of the demands to come from their new masters, as the IMF/EU have demonstrated in offering what they try to spin as advice, like cuts to health and the railway, in exchange for life sustaining installments of the Greek bailout.

It's easy enough to keep the public numb with an overload of information, caffeine, sugar and pornography for awhile, but will we all simply roll over and keep taking it? Chances are we will as the public has barely lifted a finger as governments on both sides of the Atlantic have bent over backward to make sure their banking buddies earn every penny on their wagers while the public has paid the price of their losses through bailouts paid for by doubling down on debt and 'austerity measures'. A debtcropper society is being created as the biggest transfer of wealth ever seen from the bottom up occurs while, like sheep to the slaughter, most continue to march in step to their banking masters. Political opportunists try to convince us that we should blame the euro or even the poor for the financial meltdown when it's clearly a corrupted system of risk and reward that is at fault. Our financial fairy tale has turned into a horror movie where a zombie population is manipulated into supporting zombie banks operating thanks to zombie governments of zombie nations. So should we take to the streets in protest? Write an angry letter to the editor? Write another blog post or better yet, start a Facebook protest page? Sit around waiting for a real life Tyler Durden? No, the only thing these people understand is money and the power it gives them, so the only way to limit their power is to take away their weapon, cash. December 7th I'll be in line to take my money out of the bank, hopefully joining thousands around Europe and maybe the world taking part in Pearl Harbor commemorations that will try to sink the banks instead of the Pacific fleet. Sparked by an interview given by former Manchester United footballer Eric Cantona, Bankrun2010 hopes to dent the money creation power of the world's most corrupt. The more who join in, the more likely they'll at least hear our voice. After all, thanks to the US Supreme Court, money is speech.

Saturday, November 13, 2010

Well, it seems there are some folks out there a little brighter than me who have figured out that it's impossible to convince people that their 140 character attention spans are limiting their ability to understand the world and are instead trying to speak to them in a way they can follow. Nothing better than a little rap to explain the economic battle between John Maynard Keynes and F.A. Hayek:

Aaaah, yes, non-rhyming rap never sounded worse, lucky we're still spending like drunken sailors. Maybe we'll get away from it and let this explain part of the solution. In case you missed it, the first Story of Stuff is here.

Were you confused about the sailing references earlier? If so, sorry, don't worry, here's a video to explain quantitative easing from the people who helped explain the Tea Party:

What's that you say? You need more? Worried that it all seems to be turning into a game to see how much of the wealth pie the rich will grab before we notice? Well, in keeping with today's easy on the blogger theme, here's the first of 23 videos explaining what a corporation is thanks to thecorporation.com:

Too bad they seem to be the only team in the last game left in town, so you might as well join 'em. Me, I'd prefer to try find another town, choice is what democracy was supposed to be about after all, no? (H/T: Self-Evident)

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Part-time recluse, part-time rockstar,full-time ranter. Paying the bills teaching English in the wild west of capitalism.
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